Principles of Macroeconomics / Unit 14 MAC 1321 short lesson, about 20 seconds
How Stabilisers Work
Captions available
The idea
In a downturn, incomes fall so tax collections fall automatically, and more people qualify for benefits so transfer spending rises. Both cushion disposable income, and both widen the deficit without any new legislation.
In practice
In a boom the same mechanisms run backwards and narrow the deficit.
Where people slip
They act immediately, which is their advantage over every discretionary measure.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it · Sources for Principles of Macroeconomics